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2022 (8) TMI 582 - AT - Income TaxInterest u/s 234C - interest for deferment of advance tax - assessee argued book profit includes capital gain income which arose in 4h quarter therefore the liability to pay advance tax arise only on 15.03.2018 30.03.2018 - HELD THAT - As provisions of S. 234C (1) regarding payment of interest shall not apply to any shortfall in the payment of the advance tax due on the returned income - this is subject to condition that the assessee has paid the whole of the amount of tax payable in respect of his total income (including windfall gains, if any), as part of the remaining instalments of advance tax which are due (after accrual of windfall gain) or where no such instalments are due, i.e., in cases of windfall gain accruing after 15th of March of financial year, by the 31st day of March of the financial year. Therefore, when it is not possible for the assessee to estimate accrual or receipt of such income at any time when the payment of first, second, third or fourth instalment of advance tax, as the case may be, is due, the assessee is not liable to pay advance tax on the respective due dates in respect of such windfall gain. If on a particular due date for payment of advance tax, the facts show that there is no liability to pay advance tax, non-payment of advance tax on the due date may not be considered sufficient to attract interest u/s 234C. If the returned income is higher due to unexpected income received subsequent to earlier due dates, the shortfall in payment of advance tax instalment in earlier date may not attract interest. As far as income under the head business/profession is concerned, interest under section 234C of the Act shall not be chargeable on default in payment of advance tax in respect of such income only in the first year of business/profession. For income in the nature of windfall gain/unexpected income under other heads of income, provisions of S. 234C (1) shall not apply to any shortfall in the payment of the advance tax due on such income if the same is of the nature which can't be foreseen by the assessee so as to enable him to estimate such income for the purpose of payment of advance tax. However, the above relaxation in payment of advance tax instalments is subject to condition that the assessee has paid the whole of the amount of tax payable in respect of his total income (including windfall gains, if any), as part of the remaining instalments of advance tax which are due (after accrual of windfall gain) or where no such instalments are due, i.e., in cases of windfall gain accruing after 15th of March of financial year, by the 31st day of March of the financial year. Considering the facts of the case and pronouncements of various authorities, we delete the interest charged u/s. 234C and allowed the ground of appeal raised by the appellant.
Issues Involved:
1. Applicability of interest under section 234C of the Income Tax Act, 1961 on capital gains arising in the fourth quarter. 2. Rejection of the rectification application under section 154. 3. Endorsement of CPC Bangalore's decision by the National Faceless Appeal Centre (NFAC). Issue-wise Detailed Analysis: 1. Applicability of Interest under Section 234C on Capital Gains: The core issue revolves around whether the interest under section 234C should be levied on capital gains that arose in the fourth quarter. The assessee filed its return of income for the AY 2018-19, declaring substantial capital gains in the fourth quarter, specifically on 28-02-2018 and 28-03-2018. The assessee paid the advance tax for these gains on 15-03-2018 and 31-03-2018, respectively. However, CPC Bangalore enhanced the interest under section 234C by Rs. 12,31,304/-, which was contested by the assessee. The tribunal examined the provisions of section 234C, particularly the second proviso, which states that no interest is chargeable on shortfalls due to capital gains arising after the due dates for advance tax payments, provided the tax is paid by the 31st of March of the financial year. The tribunal noted that the assessee promptly discharged the advance tax liability for the capital gains within the stipulated time frame. The tribunal further referenced several judgments and circulars, including the Supreme Court's decision in CIT Vs Rolta India Ltd., and various High Court rulings such as JCIT Vs Summit Industries Ltd. and Kwality Biscuits Ltd Vs CIT. These cases upheld the levy of interest under section 234C on book profits but did not specifically address the scenario involving unforeseen capital gains. Ultimately, the tribunal found merit in the assessee's contention, supported by precedents like Kumari Kumar Advani vs. ACIT and Express Newspapers Ltd v. Jt. CIT, which clarified that liability for advance tax on capital gains arises only after the transaction occurs. Therefore, the interest under section 234C should not apply to the shortfall arising from such capital gains if the tax is paid by the 31st of March. 2. Rejection of Rectification Application under Section 154: The assessee's application for rectification under section 154 was rejected by CPC Bangalore. The tribunal reviewed this rejection in light of the provisions of section 234C and the specific circumstances of the case. The tribunal concluded that the rejection was not justified as the assessee had complied with the statutory requirements for paying advance tax on the capital gains within the prescribed period. 3. Endorsement of CPC Bangalore's Decision by NFAC: The National Faceless Appeal Centre (NFAC) endorsed CPC Bangalore's decision, which was subsequently appealed by the assessee. The tribunal scrutinized the NFAC's endorsement, finding that it failed to consider the specific provisions and judicial precedents relevant to the assessee's case. The tribunal emphasized that the NFAC's reliance on circular no. 13/201-Income Tax and the Supreme Court's decision in CIT Vs Rolta India Ltd. was misplaced, as these did not address the particular issue of capital gains arising in the fourth quarter. Conclusion: The tribunal concluded that the interest under section 234C should not be charged on the capital gains that arose in the fourth quarter, provided the advance tax was paid by the 31st of March. Accordingly, the interest amounting to Rs. 12,31,304/- was deleted, and the appeal filed by the assessee was allowed. Order Pronouncement: The appeal was allowed, and the order was pronounced in the open court on 10th August 2022.
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